PHOENIX — Commercial construction in the Valley is facing increased costs, higher demand and labor shortages, industry analysts said.
And that labor shortage may trickle down to you – and the way companies are trying to fix supply chain problems.
According to an analysis by commercial builder Mortenson, the demand for commercial construction has gone up, fueled in part by companies deciding to onshore more of their products. Onshoring means producing products closer to the customer base to decrease shipping time and costs.
"Our core market has been the distribution warehouse market," Rusty Martin with Graycor construction said. "We only got busier over the last couple years."
There are large commercial warehouses and factories being built in the far East and West Valley. But Martin said while the demand is there, those projects are taking more time to complete because of material and labor shortages.
"Our subcontracts, out trade partners are just not able to keep the same production rates they had in the past," Martin said.
Mortenson compiled a market analysis of the Phoenix area, taking into account the availability of labor, cost of the projects and materials cost.
According to Mortenson, commercial construction has increased dramatically since 2019. As expected, materials have increased in price along with inflation. Currently the most expensive product is PVC pipe, owing to the petroleum content of PVC. Mortenson also looked at the construction labor market year over year. Analysts found the labor market shrank from 2021 and is essentially flat.
But the projects continue to go up.
Taiwan Semiconductor Manufacturing Company is building a massive microchip plant in the North Valley by I-17 and Carefree Highway.
"A mid-rise hotel is nothing in comparison to that larger project," Mortenson analyst Ty Bohlender said.
Bohlender said a project as large as the TSMC plant attracts a large amount of labor from Arizona, but also attracts labor from other states, contributing to a shortage of available workers. And because projects are offering more pay or more benefits to attract those workers, that raises the cost of labor.
"We're drawing those thousands of skilled workers that have to be on those projects, that raises the rate or raise incentives for the entire construction industry," Bohlender said.
The Great Resignation did hit the building trades, Bohlender said, but fewer people are also deciding to go into those trades to begin with.
Bohlender said the forecast for the commercial construction market is slow and cautiously optimistic, and with a lot of job opportunities.
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